National living wage to increase alongside age threshold fall

Employers of low-paid workers in the UK will have to absorb another rise to the national living wage and pay it to over-23s from April 2021, the Chancellor has confirmed.

Rishi Sunak confirmed the increase in his Spending Review 2020, in which it was announced the national living wage will increase from £8.72 to £8.91 an hour from 1 April 2021.

The national living wage age threshold will also fall to cover those aged 23 and over – a change from over-25s in 2020/21.

Workers aged between 21 and 22 will see their minimum hourly rate increase to £8.36, while the rate for 18 to 20-year-olds is set to rise to £6.56 an hour.

Under-18s and apprentices will see their respective rates hit £4.62 and £4.30 an hour.

Bryan Sanderson, chair at the Low-Pay Commission (LPC), said:

“The difficulty in looking forward, even to next April, is daunting.

“This prudent increase consolidates the considerable progress of recent years and provides a base from which we can move towards the Government’s target.”

The Treasury intends to increase the national living wage for workers aged 21 and over to £10.50 an hour by 2024.

Increasing these rates in the current climate, however, was a formidable task for the LPC, which had to balance the solvency risks to smaller employers with lower-paid workers’ needs.

Rain Newton-Smith, chief economist at the Confederation of British Industry, said:

“Many lower-paid workers have been the heroes of the COVID-19 crisis, but unemployment is rising in lower-paying sectors and these increases will be tough for some firms to afford.”

Ministers had been expected to freeze the 2021/22 rates after Sunak said in his Spring Budget 2020 speech that the rise will only go ahead “if economic conditions allow”.

For further information on the National Living Wage increase, please contact James Alesbury on 023 8046 1222.